S&P 500 broad market index futures are
rising by 0.3% to 5524 points, recovering after a 2.8% drop over the past three
days. Although it seems likely that this drop could evolve into a standard
5.0-7.0% downside correction, the market is known for its surprises.
In an unexpected turn of events, current U.S.
President Joe Biden has dropped out of the presidential race in favor of
Vice-President Kamala Harris. This move is rare in American political history,
as presidents typically seek a second term. Despite the shake-up, market
players have been largely indifferent. U.S. 10-year Treasury yields declined to
4.20% from 4.24%, and the U.S. Dollar retreated by 0.1%, reflecting a neutral
response considering the steady bets on a September interest rate cut by the
Federal Reserve at 98.1%.
The Democratic Party may be relieved by
Biden's decision, believing it boosts their chances of retaining the White
House. Donald Trump has claimed that defeating Kamala Harris would be easier
than defeating Biden. Harris must now select a vice-presidential nominee and
secure approval from the Democratic Convention in August. Her challenge will be
to present a strong political agenda to compete with Trump effectively.
Investors are now focused on potential Fed
monetary guidance at the end of July. Key macroeconomic data released this
week, including the first estimate of U.S. Q2 GDP and the June PCE Price Index,
could influence Fed decisions and market direction. Wall Street expects Q2 GDP
to rise to 1.9% QoQ from 1.4%, and the PCE Price Index to edge higher by 0.1%
MoM, potentially resulting in a neutral market impact. Fed Chair Jerome Powell
may also consider Trump's advice against raising interest rates before the
November elections.
Netflix (NFLX) has disappointed investors with
weak Q3 2024 forward guidance, despite strong Q2 results. Attention now turns
to Alphabet (GOOG) and Tesla (TSLA), with Wall Street anticipating a 56.4% YoY
earnings increase, the highest expectation since 2021. Tesla, being more
cyclical, carries a higher risk of disappointing investors, particularly with
its Q3 forward guidance.
Large investors do not seem concerned about a
correction. The SPDR S&P 500 ETF Trust (SPY) reported $7.6 billion in net
inflows last week, though it was only $1.35 billion by Friday morning.
Technically, the S&P 500 index has
surpassed its primary targets of 5250-5350 points and reached extreme targets
at 5580-5680 points. Immediate resistance is at 5600-5620 points, with support
at 5500-5520 points. If the index falls below this support, it may continue
down to 5400-5420 points. A correction signal has appeared at 5511 points.
Oil prices dropped near the support range of
$80.00-82.00 per barrel for Brent crude last Friday and may head toward
$77.00-72.00 per barrel if the support is breached. A technically favorable
period for declining oil prices is expected to last for two more weeks.
Gold prices, having reached mid-term targets
of $2000-2100 per troy ounce, are now targeting extreme levels of $2400-2500. A
technically favorable period for price increases will start next week,
potentially keeping gold within the $2400-2500 range by the end of August. For
a downside scenario targeting $2200 per ounce to materialize, support at
$2300-2320 must be breached. Immediate resistance is at $2490-2510, with
support at $2390-2410 per ounce.
The U.S. Dollar is down 0.1% this week. The
EURUSD nearly hit its upside targets of 1.10000-1.11000, reaching 1.09470, and
is now retesting the support at 1.08100-1.08400. This pivot point could
determine the next move, with equal chances for a rebound towards 1.10000 or a
decline towards 1.05000.